Online Sellers Unite to Oppose Ecommerce Tax Proposals

With the support of eBay, a group of small online sellers on Wednesday formally launched a coalition to lobby against federal proposals to require ecommerce merchants to collect sales taxes.

The We R Here group, the latest entrant in the long-running and contentious debate over online sales tax, formed about a month ago but staged its official coming-out party this week in the form of an online presentation featuring several Web-based sellers who offered sympathetic stories about their businesses and the detrimental impact that a new requirement to collect taxes in the more than 9,000 jurisdictions across the country would have.

"If I should have to start handling all these different tax jurisdictions, I would have no choice [but] to hire someone to do that for me," says Brandi Tolley, an Army veteran with a special-needs child who runs the online clothing store Buy Big from Brandi based in Springfield, Ill.

With nearly 1,000 members, the coalition is calling on members of Congress to oppose bills that have been offered in the House and Senate that would empower states to require out-of-state ecommerce vendors to remit sales taxes on purchases their residents made.

Online purchases are currently subject to taxes in states with sales-tax laws, but the U.S. Supreme Court has held that only retailers with a physical presence in a state are required to collect the tax. The court affirmed that Congress could change that through legislation, but that absent action at the federal level, states could not impose the collection requirement.

That ruling, which predated the advent of Internet commerce, left it to individual consumers to report and remit the tax levied on purchases from outside the state when the retailer didn't collect the tax at the time of purchase. But most consumers either don't know about that requirement, known as use tax, or ignore it, and state tax administrators have complained about mounting revenue shortfalls.

The We R Here coalition is seeking to put a human face on the issue, arguing that requiring small online sellers to keep track of the tangle of state and local tax codes across the country would be an overwhelming burden, and put many out of business.

The group is headed by Phil Bond, who previously served as president of Tech America and as under secretary for technology at the Department of Commerce.

"We don't believe it is the job of small businesses to collect sale taxes for governments where they don't live, where they don't have a business presence, where they don't receive government services," Bond says, calling the sales-tax proposals "unfair and unwise."

Similar bills have been introduced in the House and Senate. Both measures would only authorize states to require online sellers to remit sales taxes after they had taken steps to simplify their tax codes, intended to lessen the burden on out-of-state retailers. Each bill also includes an exemption for smaller sellers: the House version sets a threshold of $1 million in annual revenue, while the Senate bill caps the exemption at $500,000.

The We R Here coalition is couching its message to lawmakers as a jobs issue, arguing that the Web is an essential platform for small businesses, and that requiring them to collect sales taxes for jurisdictions across the country would inevitably stifle growth.

Indulging in the Washington convention of acronyms, the We R Here name refers in longhand to "Web-Enabled Retailers Helping Expand Retail Employment."

An eBay representative did not immediately respond to a request for comment on the company's involvement with We R Here, though the ecommerce giant has been promoting the launch event and posted a link to the news release announcing the new coalition on its Main Street policy page.

Sales-tax legislation has become one of eBay's chief policy concerns, as the firm has vigorously opposed any effort that would place new collection requirements on its sellers. That position stands in sharp contrast to the stance that rival Amazon has taken in support of a federal measure to streamline sales taxes to override various state efforts to require outside retailers to remit the tax.

Kenneth Corbin is a Washington, D.C.-based writer who covers government and regulatory issues for CIO.com.

Follow everything from CIO.com on Twitter @CIOonline, on Facebook, and on Google +.